John J. Byrne Dies at 80; Turned Around Geico

John J. Byrne, who became an insurance industry legend by saving Geico from the brink of bankruptcy in the 1970s and averting widespread financial damage, died on Thursday at his home in Etna, N.H. He was 80.

The cause was cancer, his family said.

Mr. Byrne’s stature only grew in 1985, when he took Fireman’s Fund public in what was then the biggest initial stock offering in history. Warren E. Buffett, who made some of his billions investing in Geico at the time Mr. Byrne was hired to reverse its downward spiral, called Mr. Byrne “the Babe Ruth of insurance.”

Mr. Byrne succeeded by wielding a sharp pencil to cut costs, making cautious but wise bets and juggling many financial balls. In 2000, Forbes magazine said he “made insurance look sexy.”

“Jack Byrne has distinguished himself as one of the insurance industry’s pre-eminent general managers, most creative turnaround experts and most productive capital managers,” the Insurance Hall of Fame said when it inducted him in 2009.

His rescue of Geico (the name is an acronym for the Government Employees Insurance Company) saved the nation from the sort of financial trauma it experienced when the Penn Central railroad declared bankruptcy in 1970, analysts said at the time. Insurance companies are intricately interconnected, and the collapse of one major institution can have a damaging impact throughout the industry, potentially requiring government intervention.

Geico was formed with the idea of offering federal employees auto insurance at reduced rates because they had fewer accidents. It worked magnificently, and even better after Geico opened its market to private sector white-collar workers as well.

But a combination of overexpansion, inflation, federal price controls, bad risks and its own questionable accounting caused Geico to struggle in the 1970s. In 1975 it experienced its first loss in 36 years, a whopping $126 million. Mr. Byrne agreed to take on the challenge after being passed over for the top job at Travelers Insurance, where he was executive vice president.

He began cutting costs at Geico by laying off 3,000 of the company’s 7,000 employees. He withdrew from New Jersey and Massachusetts entirely because regulators there had kept premium costs too low to be profitable. He kicked high-risk drivers off the rolls and raised rates by as much as 40 percent. And he persuaded 27 competing insurance companies to contribute capital to help avert a Geico bankruptcy and so protect themselves.

At Geico’s nadir, Mr. Byrne shocked Wall Street by offering the public $75 million in convertible preferred stock. Mr. Buffett responded by betting $4.1 million on the company, starting his purchases at $2 a share, according to published reports.

Five years later, Geico shares traded at $15. Mr. Buffett’s investment company, Berkshire Hathaway, continued to buy Geico stock and in 1995 completed its purchase of the remaining shares, paying $70 apiece. Today, Geico is a jewel in Berkshire Hathaway’s crown and a household name thanks to heavy advertising campaigns on television and radio.

Mr. Byrne also improved Geico’s service. He boasted about handing a customer a check 13 hours after a 2 a.m. accident. By 1976, the company had $137 million in capital, enough to move ahead.

The Insurance Hall of Fame quoted Mr. Buffett as saying that Mr. Byrne was “just beginning to get warmed up.” In 1985, James D. Robinson III, chairman of American Express, hired Mr. Byrne to take over its Fireman’s Fund unit, which had racked up hundreds of millions of dollars in losses since Amex bought it in 1968. Mr. Byrne said his assignment was to “put a pretty face on the cover” of a company that traced its roots to the Great Chicago Fire of 1871 and the San Francisco earthquake of 1906.

Amex spun off the company in an initial public offering that raised more than $900 million; a selling point was that Mr. Byrne would continue as chief executive. In dollars, it was the biggest initial offering to date. In 1991, Allianz, the German financial services company, bought Fireman’s from shareholders for $1.1 billion.

Some of Fireman’s assets that were not sold ended up in Mr. Byrne’s hands, and he converted them into the White Mountains Insurance Group, a company registered in Bermuda with headquarters in New Hampshire that has operated troubled insurance companies for more than 20 years.

John Joseph Byrne Jr. was born on July 11, 1932, in Paterson, N.J. His father owned a small insurance company in Wildwood, N.J., and as a boy John Jr. did office chores for him. He earned an undergraduate degree from Rutgers and a master’s degree from the University of Michigan, both in mathematics. He served in the Air Force before starting in the insurance industry as an actuary for the Lincoln National Life Insurance Company.

He is survived by his wife of 54 years, the former Dorothy Cain; his sons, John III, Patrick and Mark; his brother, James; and seven grandchildren.

To illustrate Mr. Byrne’s mastery of the insurance business, Mr. Buffett once compared him to “the chicken farmer who rolls an ostrich egg into the hen house and says, ‘Ladies, this is what the competition is doing.’ ”

Correction:

Because of an editing error, an obituary on Wednesday about the insurance executive John J. Byrne misstated the year that the investment company Berkshire Hathaway completed its purchase of Geico, of which Mr. Byrne had been chief executive. It was 1995, not 1975.

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